Rizal Commercial Banking Corporation (RCBC) vs.

Court of Appeals
G.R. Nos. 128833, 128834, and 128866, April 20, 1998

Malayan Insurance Company, Inc. (MICO) - petitioner

RCBC - petitioner
Goyu & Sons, Inc. (GOYU) - respondent
FACTS:

The issues relevant to these 3 consolidated petitions revolve around the fire loss claims of respondent
GOYU with petitioner MICO in connection with the mortgage contracts entered into by and between RCBC
and GOYU.

GOYU applied for credit facilities and accommodations with RCBC at its Binondo Branch. Thereafter,
RCBC recommended GOYU’s application for approval by RCBC’s executive committee. A credit facility in
the amount of P30 million was initially granted. Upon Goyu’s application and the said recommendation,
RCBC’s executive committee increased GOYU’s credit facility to P50 million, then to P90 million, and finally
to P117 million.

In order to secure the said credit facilities, GOYU executed two real estate mortgages and two chattel
mortgages in favour of RCBC, which were registered with the RD at Valenzuela, Metro Manila. Under each
of these four mortgage contracts, GOYU committed itself to insure the mortgaged property with an
insurance company approved by RCBC, and subsequently, to endorse and deliver the insurance policies to
RCBC.

GOYU then obtained in its name a total of 10 insurance policies from MICO. In February 1992, Alchester
Insurance Agency, Inc., the insurance agent where GOYU obtained the Malayan insurance policies,
issued 9 endorsements in favour of RCBC seemingly upon instruction of GOYU.

Two months after, one of GOYU’s factory buildings in Valenzuela was caught on fire. Consequently, GOYU
submitted its claim for indemnity on account of the loss insured against. MICO denied the claim on the
ground that the insurance policies were either attached pursuant to writ of attachments/garnishments
issued by various courts or that the insurance proceeds were also claimed by other creditors of GOYU
alleging better rights to the proceeds than the insured.

Consequently, GOYU filed a complaint for specific performance and damages before the RTC Manila.
RCBC, one of GOYU’s creditors, also filed with MICO its formal claim over the proceeds of the insurance
policies, but said claims were also denied for the same reasons that MICO denied GOYU’s claims.

RTC Manila
• Confirmed that GOYU’s other creditors (Urban Bank, Alfredo Sebastian, and Philippine Trust Company)
obtained their respective writs of attachments from various courts, covering an aggregate amount of
P14,938,080.23.
• Ordered that the proceeds of the 10 insurance policies be deposited with the said court minus the
aforementioned P14,938,080.23.

Accordingly, MICO deposited the amount of P50,5050,594.60 with Branch 3 of the Manila RTC. Also,
another notice of garnishment was handed down by another Manila RTC (Branch 28) for the amount of
P8,696,838.75.

RTC Manila Judgment

Rendered a Judgment in favor of GOYU and against MICO for the claims and damages; RCBC to pay
GOYU damages. Further, the Clerk of Court was also ordered to release immediately to the plaintiff the
amount of 50 million deposited with the Court by defendant Malaya, together with all the interest earned
thereon.

Both parties appealed.

GOYU - Unsatisfied with the amounts awarded in its favour
MICO and RCBC - disputed the trial court’s findings of liability on their part.

Court of Appeals
• Partly granted GOYU’s appeal
• Sustained the findings of the trial court with respect to MICO and RCBC’s liabilities

ISSUE:
Whether RCBC, as mortgagee, has any right over the insurance policies taken by GOYU, the mortgagor, in
case of the occurrence of loss

HELD:

Yes. It is settled that a mortgagor and a mortgagee have separate and distinct insurable interests in the
same mortgaged property, such that each one of them may insure the same property for his own sole
benefit. There is no question that GOYU could insure the mortgaged property for its own exclusive benefit.

In the present case, although it appears that GOYU obtained the subject insurance policies naming itself as
the sole payee, the intentions of the parties as shown by their contemporaneous acts, must be given due
consideration in order to better serve the interest of justice and equity.

It is to be noted that nine endorsement documents were prepared by Alchester in favor of RCBC. The Court
is uncertain how Alchester could arrive at the idea of endorsing any specific insurance policy in favor of any
particular beneficiary or payee other than the insured had not such named payee or beneficiary been
specifically disclosed by the insured itself. It is also significant that GOYU voluntarily and purposely took the
insurance policies from MICO, a sister company of RCBC, and not just from any other insurance company.
Alchester would not have found out that the subject pieces of property were mortgaged to RCBC had not
such information been voluntarily disclosed by GOYU itself. Had it not been for intention of obtaining
insurance coverage in compliance with its undertaking in the mortgage contracts with GOYU, Alchester
would not have known of GOYU’s intention of obtaining insurance coverage in compliance with its
undertaking in the mortgage contracts with RCBC, and verily, Alchester would not have endorsed the
policies to RCBC had it not been so directed by GOYU.

On equitable principles, particularly on the ground of estoppel, the Court is constrained to rule in
favor of mortgagor RCBC. RCBC, in good faith, relied upon the endorsement documents sent to it
as this was only pursuant to the stipulation in the mortgage contracts. The High Court found such
reliance to be justified under the circumstances of the case. GOYU failed to seasonably repudiate the
authority of the person or persons who prepared such endorsements. Over and above this, GOYU
continued, in the meantime, to enjoy the benefits of the credit facilities extended to it by RCBC. After the
occurrence of the loss insured against, it was too late for GOYU to disown the endorsements for any
imagined or contrived lack of authority of Alchester to prepare and issue said endorsements. If there had
not been actually an implied ratification of said endorsements by virtue of GOYU's inaction in this case,
GOYU is at the very least estopped from assailing their operative effects.

To permit GOYU to capitalize on its non-confirmation of these endorsements while it continued to enjoy the
benefits of the credit facilities of RCBC which believed in good faith that there was due endorsement
pursuant to their mortgage contracts, is to countenance grave contravention of public policy, fair dealing,
good faith, and justice. Such an unjust situation, the Court cannot sanction. Under the peculiar
circumstances obtaining in this case, the Court is bound to recognize RCBC's right to the proceeds of the
insurance policies if not for the actual endorsement of the policies, at least on the basis of the equitable
principle of estoppel.

Moreover, GOYU cannot seek relief under Section 53 of the Insurance Code which provides that the
proceeds of insurance shall exclusively apply to the interest of the person in whose name or for whose
benefit it is made. The peculiarity of the circumstances obtaining in the instant case presents a justification
to take exception to the strict application of said provision, it having been sufficiently established that it was
the intention of the parties to designate RCBC as the party for whose benefit the insurance policies were
taken out. Consider thus the following:

1. It is undisputed that the insured pieces of property were the subject of mortgage contracts entered into
between RCBC and GOYU in consideration of and for securing GOYU's credit facilities from RCBC.
The mortgage contracts contained common provisions whereby GOYU, as mortgagor, undertook to
have the mortgaged property properly covered against any loss by an insurance company acceptable
to RCBC.
2. GOYU voluntarily procured insurance policies to cover the mortgaged property from MICO, no less
than a sister company of RCBC and definitely an acceptable insurance company to RCBC.
3. Endorsement documents were prepared by MICO's underwriter, Alchester Insurance Agency, Inc., and
copies thereof were sent to GOYU, MICO and RCBC. GOYU did not assail, until of late, the validity of
said endorsements.
4. GOYU continued until the occurrence of the fire, to enjoy the benefits of the credit facilities extended
by RCBC which was conditioned upon the endorsement of the insurance policies to be taken by GOYU
to cover the mortgaged properties.

This Court can not over stress the fact that upon receiving its copies of the endorsement documents
prepared by Alchester, GOYU, despite the absence written conformity thereto, obviously considered said
endorsement to be sufficient compliance with its obligation under the mortgage contracts since RCBC
accordingly continued to extend the benefits of its credit facilities and GOYU continued to benefit therefrom.
Just as plain too is the intention of the parties to constitute RCBC as the beneficiary of the various
insurance policies obtained by GOYU. The intention of the parties will have to be given full force and effect
in this particular case. The insurance proceeds may, therefore, be exclusively applied to RCBC, which
under the factual circumstances of the case, is truly the person or entity for whose benefit the policies were
clearly intended.

PETITIONS were GRANTED.

Decision and Resolution of the CA were REVERSED and SET ASIDE.
Petition of RCBC against respondent Court was DISMISSED.

Respondent Sebastian’s right as attaching creditor must yield to the preferential rights of Rizal Commercial
Banking Corporation over the Malayan insurance policies as first mortgagee.